George Kerevan: Scottish employment statistics and damned lies

The devil’s in the detail when it comes to jobs data, so let’s not be too hasty in consigning Scotland to the scrapheap, writes George Kerevan

UNEMPLOYMENT in Scotland is up again – yet has fallen in the UK as a whole. The number in work in Scotland fell by 27,000 in the three months to September, according to the Office of National Statistics (ONS). In the UK, employment rose by 100,000. What gives?

Basically, one of three things could be happening: The SNP Government has taken its eye off the economic ball; the ONS statistics are a load of baloney; or the UK improvement is a blip caused by the temporary effect of the Olympic Games.

Before we get too suicidal, I should point out that (even with the recent drop) the employment rate in Scotland is still higher than in five of the nine English regions, including London. It is also higher than in Wales or Northern Ireland. For that matter, Scottish employment is higher than in 21 of the EU member states, and higher than in America. So Alex Salmond and John Swinney must be doing something right.

Let’s start with the proposition that the fall in employment in Scotland might be a purely local phenomenon. Playing economic CSI, we have two other bits of hard evidence to take into account.

First, Scottish GDP (output) contracted in the nine months from October 2011 to June 2012. But the same thing happened in the UK as a whole. In the first three months, the Scottish contraction was actually a little less severe than in the UK.

Then it was equal to the UK downturn for the remaining two quarters. This refutes any notion that economic conditions are intrinsically worse north of the border. If anything, the cumulative loss of output for these nine months is slightly less in Scotland. So why would employment fall?

The second bit of evidence concerns company formation. In the year to March 2012, the number of enterprises in Scotland increased by a record 10 per cent – fully 30,835 new firms. Not only was this the biggest annual increase since 2000, the growth in new enterprises in Scotland happened at roughly double the rate for the UK as a whole.

Again, this is hardly indicative that Scotland was under-performing compared to the UK as a whole.

Interestingly, the latest company growth figures show an increase of fully 20 per cent (or 9,505 firms) in the number of enterprises in the Scottish construction industry – despite double-dip recession in the UK. That suggests to me the Scottish Government’s policy of switching spending from revenue to capital investment in infrastructure is having a positive impact on the local economy.

Nevertheless, there are some odd things lurking in the latest Scottish employment figures that require examination. That fall of 27,000 in employment has not been accompanied by a like rise in official unemployment. Indeed, the figure for those seeking unemployment allowance has hardly changed. This paradox is explained by the fact that the displaced workers seem to have joined the ranks of the “inactive” –those not seeking work.

What could possibly cause so many people to leave the labour market (if the data proves reliable)?

One clue lies in the breakdown between males and females. The vast majority of those exiting the labour market in the three months to September were women – 21,000 of them. In fact, while there are 35,000 more men recorded in employment in Scotland over the year, there are 39,000 fewer women.

Why might the jobs market be getting tighter for women? It might be down to a loss of unskilled jobs and public sector employment.

Or, paradoxically, it might be that the jobs are there but that women in particular have difficulties in finding them out due to childcare issues or lack of appropriate skills. Mature women with families are in an especially difficult situation when it comes to finding time for retraining. Message to the Scottish Government: we may need more emphasis on helping women into work.

Which brings us to the next suspect in The Case Of The Lost Jobs – faulty data. The employment statistics are compiled using sampling methods which can have a significant degree of error, especially at a regional level. Here is what the ONS says about the latest Scottish figures: “The only region of the UK that is showing a strong decrease in the employment rate is Scotland which decreased by one percentage points. However, it is not yet clear whether this decrease is the start of a pattern of decreases or due to sampling variability”.

So even the ONS thinks the jury is still out. Finally, could the poor Scottish employment figures simply be a harbinger of a winter of rising unemployment throughout the UK?

Yesterday’s news that the eurozone (Britain’s main export market) has officially entered double-dip recession points us in this direction.

It is worth repeating that the ostensibly good performance in job creation at a UK level is highly misleading. True, employment is up by 100,000 in the three months to September. But this includes 22,000 people on government training schemes, while half the new jobs were part-time. There was also a huge jump in the number of self-employed people working part-time, which could represent a form of disguised unemployment.

Over the past year, the rise in full-time employment in the UK was actually less than one per cent – indicative of economic stasis, not recovery. Worse, a lot of these full-time jobs were only temporary contracts. In 12 months, the number of people on temporary contracts has jumped by 100,000 (mostly women).

Against the background of this chronically weak labour market, the only clear sign of job creation was the London Olympic Games. Employment in London jumped by 54,000 over the summer to September, the highest increase of any UK region and represents more than half the total UK jobs increase.

Prudence suggests we wait to see the trend over the next two quarters before declaring a jobs bonanza in the UK and a unique employment meltdown in Scotland.